The recent case of Bowser v Smith & Anor and another can be seen as a warning shot to professional executors who act in hostile litigation without the protection of a Beddoe order. In this appeal from a cost award, the professional executor, Mr Bowser (a solicitor), was found to be at fault for not ensuring he had Beddoe protection before seeking the removal of his co-executor and he was not entitled to an indemnity from the estate for his costs.
There are special cost rules which apply to trustees and personal representatives (a term which includes executors). Those rules are contained in the court rules (Civil Procedure Rule 46.3 and the accompanying Practice Direction 46.1) and have the effect that a trustee or personal representative (PR) who is party to legal proceedings is broadly entitled to be paid the costs of those proceedings out of the relevant trust or estate (where they can’t be recovered from anyone else). This is subject to one important exception, namely where it is considered that those costs have not been properly incurred, usually when the PR or trustee has not acted reasonably.
It is open to PRs or trustees who may be contemplating legal proceedings to seek an order from the Court to determine whether a fiduciary would be entitled to an indemnity as to their costs from the trust/ estate, should that litigation be pursued or defended. This is known as a Beddoe order (from the case of Re Beddoe). An application for a Beddoe order usually seeks directions from the Court as to whether the fiduciary would be acting reasonably if they were to proceed with (or defend) a claim. Without a Beddoe order in place, a PR or trustee put themselves as risk as to costs, as was evident in this case.
Mr Bowser unsuccessfully sought the removal of his co-executor (the deceased's estranged wife, Julie) without the protection of a Beddoe order. The previous hearing had ordered that both he and Julie be removed, something she had herself proposed. Julie noted that she found Mr Bowser aggressive, abusive and intimidating. He in turn had perceived a conflict of interest in Julie's role as executor and her intention to bring a claim seeking reasonable financial provision from the estate under the Inheritance (Provision for Family and Dependants) Act 1975.
In the appeal judgment, Sir Launcelot Henderson considered the relevant court rules and statute in relation to the reimbursement of a PR's expenses and costs and Mr Bowser's six grounds for appeal against the initial cost award. This included a claim that the Judge's finding that Mr Bowser's conduct in bringing and pursuing the proceedings was not a reasonable and proper exercise of his powers as a personal representative was perverse and erroneous in both fact and law. Mr Bowser failed on all six grounds and Sir Launcelot Henderson upheld the Judge's award that Mr Bowser paid Julie's costs of the claim on the standard basis and he be deprived of any indemnity in respect of his own costs from the estate.
The case serves as a lesson on the risks for PRs (or trustees) entering into hostile litigation without the benefit of Beddoe protection, which it is noted that Mr Bowser did not appear to have considered. It is incumbent on those embarking on such a course of action to show that they had acted reasonably and properly in pursuing the litigation. A risky, and in this case costly, mistake to make.